Why Does My Mortgage Payment Keep Going Up?

If you have a mortgage, you likely expect your monthly payments to remain relatively stable over time. However you may have noticed your mortgage payment creeping higher month after month.

Even if you have a fixed-rate mortgage, this can be scary and hard to understand. If I have a fixed rate and nothing else about my loan has changed, why does my mortgage payment keep going up?

Unfortunately, several factors can cause your mortgage payment to rise. The good news is that by understanding what’s driving the increase, you can anticipate and prepare for higher payments.

5 Common Reasons Mortgage Payments Increase

Here are 5 of the most common reasons your mortgage payment may be going up:

1. Property Taxes

One of the biggest culprits of rising mortgage payments is increased property taxes. If your monthly payment includes property taxes in escrow, any increase in your property taxes will drive up your payment.

Property taxes can increase for several reasons:

• Your home being reassessed at a higher value
• Loss of any tax exemptions you previously qualified for
• Your municipality raising property tax rates

Unfortunately, you don’t have much control over your property taxes. But you can check with your county assessor to ensure your home isn’t overassessed. And appeal your assessment if you believe the assessed value is too high.

2. Homeowners Insurance

If your mortgage payment includes homeowners insurance premiums in escrow, higher premiums will increase your monthly payment.

Common reasons for rising homeowners insurance premiums include:

• High claims activity and losses in your area
• Reduced credit score since you first got the policy
• Dropped coverage limits

To reduce the impact on your mortgage payment, shop around for lower insurance rates when it’s time to renew your policy. Raising deductibles can lower premiums too, but make sure you can afford the higher out-of-pocket costs in the event of a claim.

3. Interest Rate Adjustments

If you have an adjustable-rate mortgage (ARM), you can expect your mortgage payment to change when your interest rate adjusts.

ARM interest rates are fixed for an initial period, usually 5, 7 or 10 years. After that, the rate begins adjusting periodically based on an index. When rates rise, your payment will increase at your next adjustment.

While unpleasant, ARM payment increases are normal if you have this type of mortgage. You can lessen the impact by refinancing into a fixed rate before your ARM adjusts, if rates are favorable.

4. Mortgage Escrow Shortages

It’s common for a mortgage servicer to raise your payment if there is a shortage in your escrow account.

This occurs when the amount collected over the last year wasn’t enough to cover your property taxes and insurance. The servicer will increase your monthly escrow payment to prevent another shortage.

While frustrating, this prevents a large lump-sum payment when your taxes and insurance are due. Carefully review your escrow analysis statement from your mortgage servicer to understand the shortage.

5. New Fees

Finally, your servicer may increase your mortgage payment by charging new fees. This could include:

• Late fees if your payment was delayed
• Returned payment fees for bounced checks or failed online payments
• Loan modification fees
• Force-placed insurance fees if your policy lapsed

Look over your mortgage statement to see if there are any new fees. Reach out to your servicer immediately to dispute invalid fees.

When Can Mortgage Payments Decrease?

Fortunately, mortgage payments can also decrease in some situations:

• Your property taxes or homeowners insurance go down
• Interest rates fall if you have an ARM
• You pay off private mortgage insurance (PMI)
• Your servicer modifies your loan terms to make it more affordable
• You enter a forbearance program

So if you’ve been diligent and your payment dropped, congratulations – you’re saving money!

5 Ways to Prevent Surprise Payment Increases

While some increases are inevitable, you can reduce surprises by:

• Choosing a fixed-rate mortgage to lock in your rate
• Monitoring your escrow balance to anticipate tax and insurance changes
• Paying close attention to ARM adjustment notices
• Reviewing statements for new fees and disputing them quickly
• Maintaining good credit and shopping around for lower insurance rates

Staying informed and proactive will make payment increases more manageable. But if your mortgage becomes unaffordable, be sure to reach out to your servicer to discuss alternative options right away.

What To Do If Your Payment Is Unaffordable

If your mortgage payment is rising beyond what you can pay, you have alternatives:

• Refinance – If rates are low enough, refinancing can lower your payment.

• Loan modification – Your servicer may modify your loan terms to reduce your payment.

• Forbearance – Temporarily pause or reduce payments for several months.

• Sell your home – As a last resort, you may need to sell and downsize.

• Foreclosure: If nothing else works, foreclosure can get rid of the mortgage debt. But this severely damages your credit.

Don’t wait until you’ve missed several payments and are facing foreclosure. Be proactive and discuss options with your servicer at the first sign of trouble. The earlier you seek help, the more likely you can avoid foreclosure and keep your home.

The Takeaway

When your mortgage payment goes up every month, it can be stressful and annoying. Most of the time, though, increases are caused by outside factors, such as taxes and insurance.

While you may not be able to control these costs, you can anticipate increases, budget accordingly, and proactively discuss alternatives if your mortgage becomes unaffordable.

Staying informed about your loan, maintaining good credit, and reaching out for help early on can go a long way toward managing increases while still enjoying the benefits of homeownership.